Dude, Where’s Your Piketty Review??!!

April 19th, 2014 at 10:01 am

I’m way late in weighing in on Thomas Piketty’s great book “Capital in the 21st Century,” (note the lack of subtitle–I like that–gives the title that much more weight!). That’s because I’m reading it really slowly but I’m almost done.

Why so slow? In part, because I’m savoring it–it’s a wonderful read, with trenchant insights every few pages, and there are lots of pages. Also, the damn thing is dense, and often after reading a few pages I realize I haven’t absorbed the last few paragraphs, so I need to take a break. Probably my own absorptive capacity ain’t what it used to be.

And, of course, there’s been no shortage of insightful economists weighing in. Anyway, a very few insights off of top of head, with the caveat that I’m still processing all of this:

–While TPs policy advice is extremely sound, and political economy pervades the analysis, this is not so much a book about economic policy. It is a book about economic cosmology–about the mechanics of how economies work from the perspective of wealth accumulation.

–In that sense, it’s more Newtonian than Keynesian. The former changed the way we understood the universe. The latter did too (re the economic universe), but to a lesser extent, and what emerged was less a new understanding of the relationships between growth, inequality, capital, and labor, and more a very different, much more activist, policy approach to the business cycle.

–In part, this difference also stems from TPs extremely “low-frequency” look at the data–his extremely broad, historical scope. His focus is thus structural, not cyclical. I find this to be a fascinating and salutary difference between the very high-frequency work that many American economists engage in (e.g., forecasting next month’s jobs numbers–I’d love to hear what TP would say about that endeavor).

–The danger in Newtonian economics is that people will think you’re asserting immutable, deterministic relations, e.g., his famous r>g. But TP is very, very careful to hedge on that point, stressing that the forces he documents are responsive to intervention. As he says in the NYT today: “…capitalism and markets should be the slave of democracy and not the opposite.”

–This cosmology observation is far from a critique–it’s what Krugman means when he says the book will change the way we think about the economy. I certainly hope Paul’s right about that. It’s been interesting to see the lack of response from the right, though I’m sure it’s coming.

–Just a note re his fame (see NYT link above re that). So I get a typical call from a reporter the other day, asking me what I thought about some developments around poverty policy. He then asks, “And how do you think Thomas Piketty would answer these questions?” And, having intellectually “lived with” TP for a few weeks now, I actually think I gave a pretty good answer!

Observations from an interested reader:
1. At $40 USD, the hardcover has a higher price-point than a lot of people who ‘should’ or might ‘want’ to read the book are going to pay. Here’s hoping that interested parties (churches, non-profits, labor leaders, business owners, wonks) find ways to get this information into the public conversation at a lower price-point.

2. The hardcover is a tome. For those of us who are simply ‘interested general readers’ and *not* professional economists, trying to schedule time to read this thing is … well, it’s a challenge. Putting this tome on one’s reading schedule is not a trivial matter. Here’s hoping someone figures out how to present this info to folks who aren’t willing to carve out hours of time to actually sit down and read it.
** (Hmmmm… CBPP might have an opportunity to put out video synopses – by chapter… or by topic, or by dataset… just to get this info out to more people).

3. I’m willing to part with $40 USD (+ state sales tax) in order to read actual — wait for it! — D-A-T-A. Having read ‘Das Kapital’ (Eng translation), Veblen, and other traditional economists, Piketty’s emphasis on actual facts, on actual d-a-t-a promises to be a real breath of fresh air.

4. If my preview of “Capital 2.1″ was anything close to accurate, Piketty is extremely fortunate to have a tremendously gifted English language translator. The language is beguiling, which is exceedingly unusual for economics.

5. Having decided to buy the hardcover, rather than an iPad version, the tome is so hefty that I can’t imagine toting it along on errands. You could do bicep curls with the darn thing 8^\
I won’t need a hand truck to haul it around, but crikey, that tome is hefty… (Planning ahead, I may need to get two versions: hardcover for margin notes, and iPad for toting around easily. It’s not realistic to haul a 2# tome around on errands; yet, hauling it around on errands is the only way that I’ll find time to get through it before July… I can’t be the only American with this how-much-do-I-want-to-carry-around-with-me? dilemma.)

6. Methinks there is an opportunity for someone to break this book down into chapters, and create a graphic novel for each chapter. I am not being flippant. From a pragmatic perspective, the more people who read this book, the better. However, the cheaper and easier (and more fun) it is to access the information, the more people will be likely to absorb the content.
** An outstanding example of a very well-done graphic novel is the Gettysberg Address:http://www.amazon.com/Gettysburg-Graphic-C-M-Butzer/dp/0061561762
Here’s hoping some talented graphic novelists and/or videographers get interested in translating Piketty’s book for a wider, general audience. After 30 years of ‘supply side’ silliness, it sure would be useful to discuss economics differently. However, that won’t happen until Piketty’s ideas make their way into more conversations of of us ‘normal, typical’ Americans. (And ‘typically’, people don’t spend 40 bucks and the equivalent of a work week reading an economics text. Sad, but true 8^[

7. In the past few years, we’ve seen the publication of “The Spirit Level”, “Inside Job”, “The Origin of Wealth” (Beinhocker), “The Gardens of Democracy” (based on Beinhocker), numerous analyses of ‘The Meltdown’ of 2008 calling economics structures into serious question, and all of this new economic content is challenging the conventional business-school-supply-side economic thinking. Add in Evangelii Gaudium (written by a seemingly jovial man who had a close-up view of the long term impacts of neoliberal austerity in Argentina a few decades back), and the economic axis of the world appears to be shifting in a new direction.

8. CBPP might want to consider hosting some kind of webinar series, or ‘invitation only’ Book Salon events (for labor leaders, non-profit execs, electeds, business managers, educators, or relevant decision-makers) to focus on specific chapters of this book so that people can actually make sure they understand the content. (The book is so huge, you’d have to select specific chapters or topics in order to do the ideas justice.) When people actually engage in discussions, they process content at a much deeper level; it’s been my experience that people are more willing to engage with ideas when they feel that they have someone who can guide them, or provide background for their questions. Without that kind of ‘intellectual support’, I fear that fewer people will be confident picking up this tome.

9. Translate the hours spent reading this book into ‘billable hours’, and this is not a cheap read. I’m estimating 20 – 30 hours of my time with this book – it’s a commitment.
(In my case, it goes under the ‘leisure/research’ budget. However, not everyone has that luxury.) It is going to take people time to get through the material. Here’s hoping CBPP and other interested organizations (including churches and non-profits) figure out how to help people understand and master the content. I would argue that helping people master, and articulate, the main ideas behind why inequality is bad for capitalism would be extremely cost-effective for the larger social conversation, as well as for longer-term social and economic outcomes.

Well, Jared and Paul K. have convinced me to buy the book. I don’t believe I’ll be able to slog thru it in 30 hours. From the reviews I have read, it is a re-education in economics. Or perhaps an affirmation of the reality we have lived with and ignored for 30 years. Got to get the book.

Says Pikkety, p59 “In other words, the lead that Europe and America achieved during the Industrial Revolution allowed these two regions to claim a share of global output that was two to three times greater than their share of the world’s population simply because their output per capita was two to three times greater than the global average.”

Translation: People consumed more, because they PRODUCED more. Wow. I paid $40 for that?

Economic theory, like Newtonian mechanics, has already been solved. Unlike Newtonian mechanics, economics cannot be boiled down, by ignoring variables, to to a few simple (but good enough) equations. The complexity of personal decisions does not fit well into mathematical models. I suggest folks read Mises’ “Human Action”—and it’s free online!

If inequality is a natural condition of capitalism, how did we enjoy a brief period of greater equality in the 20th Century?
*1 Much worse Depression – worse conditions led to greater corrections demanded
*2 War II – taxing rich ok because otherwise you lose the war (see WWI income tax)
*3 Powerful labor movement – factory workers, miners, long shoremen, steel workers
*4 Competition from the left – communists and socialists threat to pick off a few percent
*5 Machine politics and party bosses less dependent on wealthy contributors

It would be a shame if practical solutions got sidetracked over debates about taxing wealth. WWII and Eisenhower tax rates need to be restored. Labor rights need to be restored (weekly hours, mobility and bargaining rights for immigrants, higher minimums, end unpaid internships, phase out subsidies, confiscatory tax rates on excessive income, equal pay, international labor rights and sanctions, repeal elements of Taft-Hartley, trade sanctions for currency manipulation). Usury laws need to be restored. Trade sanctions for currency manipulation should be imposed. Higher education needs to be free (GI bill without the war or service because college is the new highschool). Corporate culture needs to change (see G.M. killing people and Apple, Google colluding to suppress salaries, Yahoo ending telecommuting days)

The great thing about discussing taxing wealth is that it moves the goal posts, it counter balances conservatives, gives liberals breathing room by presenting a radical thought as mainstream academic. Huey Long’s share the wealth campaign indirectly aided passage of Roosevelt New Deal.

The one place we do tax wealth is the estate tax, which has a long history, and should be restored to higher rates.

“Since I already advocate 90% marginal rates for income over $2 million dollars (Eisenhower pre 1960 rates) as a reasonable measure, I would say lets offer the rich a choice. Institute this program effecting income or we shall try to pass measures that tax wealth. That will get their attention.”

I left out of my bullet points:
Financial transaction tax
Anti Trust enforcement which includes preventing Comcast TimeWarner Cable merger, and breaking up too big to fail banks.
More reining in of financial sector, restoring Glass Steagall, end shadow banking and speculation. Phase out securitization of mortgages.

-“It’s been interesting to see the lack of response from the right, though I’m sure it’s coming.”

I for one can hardly wait for the “economic think tank” studies showing how the degree to which a “job creator’s” great-great grandchildren can live luxurious labor-free lives influences innovation in society today and therefore needs to be celebrated and supported by all.